Since its $280 million acquisition of Perceptive Software in 2010, Lexmark has been working hard to re-position itself, transitioning from its traditional printing roots to a provider of business process automation solutions. Its recent $54m acquisition of PACSGEAR, a healthcare ECM (enterprise content management) provider, announced on 3rd October 2013, is the latest in a string of ECM related acquisitions that have broadened Lexmark’s reach and bolstered its Managed Print Services (MPS) market position, both worldwide and across vertical industries.
Overall, Lexmark has invested approximately $540 million to acquire companies that now form Lexmark’s Perceptive Software division with annual revenue of around $170 million, which is just under 5% of the company’s total business. In August 2013, Lexmark announced its $72 million purchase of the German company Saperion AG, a developer and provider of ECM and business process management software. In addition to Saperion, so far in 2013 Lexmark has purchased Twistage, a San Franciso-based company with a cloud software platform for managing video, audio and image content; Seattle-based AccessVia, which provides retail signage and Acuo Technologies of Minneapolis, a provider of clinical management software. In 2012, Lexmark acquired ISYS Search Software, based in Australia; U.S.-based Nolij Corp; and Luxembourg-based Brainware.

Having exited the consumer inkjet business in late 2007, followed by the business inkjet market in 2012, Lexmark has made great strides in redefining its value proposition. Its increased focus on helping its customers “manage the unmanaged” (whether it is content, printers or business processes) is paying dividends. In Q2 2013, Lexmark’s MPS revenue reached $170 million growing by 12%, with an estimated total contract value per win of approximately $50 million, demonstrating its strong presence in larger enterprises. Meanwhile, Perceptive Software revenue reached $59 million, growing by 34% compared to the same period in 2012.
Driving synergies between printing and business process automation are now the hallmarks of next generation MPS contracts as enterprise customers look beyond print to drive further cost savings and improve efficiency. Whilst some businesses have taken initial steps to transition to a “less-paper” office and digitise paper-based processes, many are still heavily reliant on paper-based processes, effectively operating hybrid paper/digital business workflows. Consequently, leading MPS providers are increasingly offering solutions and services that address the need to manage both unstructured and structured content, across paper and digital output. The most effective approach to bridge the paper and digital gap is to leverage the sophisticated document capture, routing and archive capabilities of the new breed of smart multifunctional peripherals (MFPs).

Lexmark is certainly well positioned to take advantage of this and is already seeing success in its cross-selling initiatives between its Imaging Solutions and Services (ISS) and Perceptive units. According to Lexmark it is already maximising its large account ISS presence to sell Perceptive software capabilities whilst growing its MPS offering in Perceptive accounts. Over the last two quarters of 2013, Lexmark indicates that it has won over 20 new capture, content and process software deals across a range of ISS banking, retail, manufacturing, government and healthcare accounts. Meanwhile it is also capturing MPS deals in Perceptive Software healthcare accounts.

Quocirca believes that Lexmark has taken the right steps to build out its product and services to address customer needs to drive workflow efficiency. Lexmark has always prided itself on its ability to deliver customised solutions due to owning its technology and by virtue of its smaller size relative to its competitors. Whether Lexmark can maintain this customer responsiveness now that it has such a large and mixed technology portfolio remains to be seen.

Lexmark will undoubtedly face challenges in integrating what is now a vast array of products and solutions. As enterprises look to minimise paper-intensive and labour-intensive processes, business process automation will take centre stage in the next evolution of MPS. To maximise on the opportunity, Lexmark will need to reinforce its brand and value proposition, differentiating its solutions and services based on its industry focus and broad ECM capabilities. Market competition is intensifying, from both well-established ECM vendors and MPS providers, such as HP, Ricoh and Xerox that are also actively focusing on expanding their business process services footprint. Lexmark has already made strong inroads and Quocirca expects this momentum to continue in 2014 as it refines its integration and go-to-market strategy.